Mortgages

We spend a lot of time discussing programs for the upwardly mobile, but what about programs for the mature crowd?

There’s a useful, albeit fear-invoking, mortgage tool that’s available to many homeowners, but most popular with folks nearing retirement age, who need to get some cash out of their homes to use for investing in other properties or any other financial needs they have.

Most commonly – retirement.

A forward mortgage, you make payments to. A reverse mortgage you receive payments from and based on the sum of money that you receive, interests accrues.

While the reverse mortgage may be a helpful tool, it’s often perceived as undesirable. There’s a stigma attached to these loans that says, “the bank will take my home.”

Let’s be clear…

The bank will never own your home if you take a reverse mortgage unless you leave the home for a 365-day period; then you’re deemed not to be a permanent resident such as in the case of a long nursing home stay.

Other ways that people default on a reverse mortgage are by not paying taxes or their homeowner’s insurance.

That’s it.

There’s nothing else that can remove a person from their home with this type of mortgage.

The first reverse mortgage was written decades ago, but there still remains a considerable amount of fear and misunderstanding surrounding it. This makes doing your homework an extremely important task. Separating fact from fiction can provide insight about if this style of mortgage is right for you. Here are some common questions and answers.

When is a reverse mortgage paid?

A reverse mortgage is a loan against your home that you are not required to pay back as long as you live there. The loan is repaid from the borrower’s estate or the eventual sale of the home when the last surviving borrower no longer lives in the home. Money can be received in a lump sum, monthly payments, or through a line of credit.

How do you qualify for a reverse mortgage?

You must be 62 years or older to qualify and there are no income or credit requirements for a reverse mortgage. The amount you can borrow in a reverse mortgage is determined by your age, your home’s value and interest rates. The older you are, the more you can borrow.

Will I lose my home?

The bank never takes over the deed unless there is a default. Defaults can occur if the taxes and insurance are not paid current or the homeowner doesn’t live in the home for a one-year period.

How you can benefit from a reverse mortgage?

Reverse mortgages can be used to eliminate larger payments, free-up cash in order to invest, travel, pay for college educations, and many other expenses.

Also, be aware that reverse mortgages cost about 1-4% more than a traditional mortgage.

That’s upsetting… the bank loans your money back to you at a higher rate after you paid your debt off – way to reward customer loyalty!

Sadly, a high number of candidates really don’t have any other savings, so they’re stuck with not many options.

A reverse mortgage may be the answer for you, but first make sure you meet with an expert who handles these types of loans. Be sure that the expert fully understands your specific needs and can identify if this is the best approach for you.

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